Loans for house purchasing fell to 47,603 in September according to e.surv chartered surveyors, a development which will intensify criticism of Funding for Lending.
There were just 47,603 loans in the month, making it the worst September since records began in 1993.
The research showed that the biggest contraction was among high loan-to-value borrowers - who are usually first-time buyers – although loans declined among all bands and house price brackets.
On average, loan-to-value rates were at 59 per cent, the lowest since last January, showing that the market continues to be punishing for borrowers with small deposits.
Only 10 per cent of the loans went to borrowers with an LTV of 85 per cent or higher, while loans to borrowers with a deposit of less than 15 per cent remained suppressed under the 5,000 mark.
The availability of financing has been named by developers and builders as the single biggest challenge facing the housing industry. Funding for Lending was touted as an initiative that would ease the pressure on the first-time buyer market, in the face of tougher lending criteria.
e.surv business development director Richard Sexton said: “September isn’t just a one off. The mortgage market has been struggling since early June, and is considerably weaker than it was this time last year.
“The period between August 2011 and May this year marked a real upturn in lending. But that fillip planted false hope. Since then, the effects of the double dip recession have sapped the confidence lenders have in the economy.
“[Funding for Lending] will prove to be a slow-burn. The Bank of England’s latest credit conditions survey suggests an improvement in house purchase lending may be on the horizon. Lenders told the Bank the availability of secured credit will increase ‘significantly’ over the fourth quarter, and specifically referenced the Funding for Lending Scheme as a key driving force in the improvement”
According to the research, September is now the fourth consecutive month of a year-on-year drop in house purchase lending, with 7 per cent fewer loans made in Q3 than in the same period last year.